GM`s Ralph Szygenda Drives IT Innovation (
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In an interview with eWEEK, the General Motors CIO speaks candidly about the payoff on his big outsourcing bet two years ago and how IT will impact the auto maker's future during troubled economic times.Amid ongoing corporate difficulties, General Motors has been leaning heavily on CIO Ralph Szygenda to cut waste and speed innovation through a fully outsourced approach to IT. In 2006, GM awarded $7.5 billion in outsourcing contracts, and before 2011 the company will award another $7.5 billion. That big-bang moment in 2006 followed a stormy relationship with Electronic Data Systems, which was acquired by GM in 1984 and spun out as an independent company once more in 1996. EDS still retains approximately 60 percent of GMs IT work. GMs other major outsourcing partners are Hewlett-Packard, IBM, Capgemini, Compuware subsidiary Covisint and Wipro. Two years have passed since Szygenda sat down with eWEEK to discuss his then-early outsourcing strategy. He recently spoke again with eWEEK, offering Editorial Director Eric Lundquist and Contributing Editor Stan Gibson an update on how far GM has come and how much further it must go.
It has been nearly two years since GM handed out its IT outsourcing contracts. Are all the partners meeting their agreements with GM?
Its going very wellbetter than I had thought. The suppliers work well with each other. I have 1,500 people that manage them, but there hasnt been one case where Ive had a major incident between suppliers. Every now and then you catch one trying to make the other not look so good. But, overall, it has worked well.
Its amazingly complicated, but GM is complicated to start with. The issue for the suppliers is globalization. We have forced them to put in a globalized model. In most cases, they dont run a global model, but a national or regional one. So using the same processes has worked amazingly well. It has made the processes of managing IT simple.
The other aspect is multisourcing, or multiple companies working together. We allow collaborationwe dont tell them exactly how to do everything. Thats worked well.
So, have we gotten done what we wanted to do? Yes, we have. Most people thought this would never work. Instead, many companies have come to GM to learn how to do this. Fortune 20 companies are interested in how the suppliers are supporting us globally. They would like to have something like that, but they dont.
Overall, its working well. Every day is hardbut every day is hard in the auto business.
If partners were not meeting their goals, how would you handle them?
If you dont do it well, you get penalties. And we can walk away from contracts for lack of performance. Remember, winning new business is based on the performance of existing business. Each year, were still bidding out hundreds of millions of dollars of business that they want to win. Also, we have report cards that rank the companies every six months. They know exactly where they stand, and we make decisions for future business based on that.
We know how well theyre performing against other suppliers. If we had outsourced to only one company, we wouldnt know that. However, there are not a lot of IT companies, so you cant throw out a new company every day. Its a win-win model. We dont want them to lose.
Do I get mad at a suppler daily? Yeah. I wont tell you which one I just got off the phone with two hours ago.
Have you assessed penalties?
Sure. We do it constantly, based on performance, reliabilityanything. And remember, all development of new systems is done at a firm, fixed price. So they lose if they dont deliver it on time.
You havent terminated any of the agreements?
Thats right. Some companies have been disadvantaged with regard to winning new business, based upon performance, but they havent lost anything they already had.